Publication Date: September 2007
Publisher: Pardee Rand Graduate School
Author(s): Eric J. Unger
Research Area: Military and defense
This research examines the relationship between operating and support (O&S) costs and usage of Air Force aircraft, in order to improve resource allocation. Currently the Air Force uses an average cost metric to forecast costs related to flying hours. Problems arise with the accuracy of the cost per flying hour (CPFH) factors when the relationship between cost and usage is either nonlinear or includes nontrivial fixed costs. Although it may seem reasonable that if the Air Force flies an aircraft twice as many hours, O&S costs should double, empirical evidence shows that the doubling of flying hours actually increases non-fuel O&S costs by less than that amount. Fuel cost is the only category with clear statistical evidence to support the use of flying hours over aircraft inventory in predictive models. The Air Force can improve its allocation of O&S resources by altering the current proportional CPFH metrics to better accommodate fixed costs.